Bridging the appraisal gap
Investing in a community on the rise
Strengthening the housing financial ecosystem
In 2015, CRF led the development of an innovative new program to make home ownership more accessible to Detroiters. The result – Detroit Home Mortgage – launched in February 2016 is helping hundreds of people in Detroit build equity and invest in their futures through home ownership. With the help of various private, public and non-profit stakeholders in the city, CRF has taken a leadership role in developing integrated Strategies to Rebuild Detroit’s Single-family Homebuyer Ecosystem.
The housing and credit crisis greatly reduced home values and the number of home sales in Detroit, essentially turning it into a cash-based real estate market. As a result, many potential homebuyers have good credit scores and stable incomes, but could not get a mortgage because the appraiser could not find a similar home nearby with a large enough comparable sales price. Also, many distressed homes in the city do not qualify for the traditional lending necessary to purchase them, renovate them, and make them livable. This lack of financing forces many families either to pay cash or to rent instead of building equity and investing in their futures. Some homebuyers use expensive credit card debt to pay for renovations or do the renovations piecemeal over several years.
As part of the Detroit Home Mortgage initiative, CRF and the Kresge Foundation organized a symposium in 2015 to discuss strategies for increasing the demand and supply of single-family homes. From this symposium, a Working Group coalesced that met for the following year to develop, write, debate and refine strategic concepts for what would become the Detroit Home Mortgage program – an initiative that addresses financing gaps, so borrowers can afford to buy, renovate and live in one of the many homes available for sale in the city.
Detroit Home Mortgage is a perfect example of how CRF works with local resources to bring its expertise to community ecosystems. CRF created the framework for the program, which is now administered by local banks. All participating banks offer Detroit Home Mortgages to address appraisal gaps with the same low interest rates and no bank fees. Like all loans, Detroit Home Mortgages must be repaid. However, if a borrower suffers an extreme hardship beyond their control, such as loss of job where the homeowner is forced to sell the home, philanthropic support provides equity protection to help borrowers repay the second mortgage. Borrowers must also complete classes in homebuyer education and the financial risks involved in borrowing more than the appraised value of a home. CRF and its partners anticipate that the Detroit Home Mortgage program will act as a catalyst for increased mortgage lending to normalize property values in neighborhoods and eventually completely restore traditional financing to the market.